Emerging Market Debt Indicator – February 2026

Emerging market (EM) fixed income continued its solid performance, with positive returns across all asset classes over the month, despite a slightly stronger US dollar.

Amid the volatile equity market backdrop, US Treasury yields declined, supported by their safe-haven characteristics. However, the move lower was far from linear. US economic data released during the month was mixed, but markets on balance continued to move towards a dovish ‘goldilocks’ interpretation of the US economic outlook, with the market pricing in at least two rate cuts by the end of 2026.

The EM local currency debt market (JPMorgan GBI-EM GD) returned 1.3% in US dollars, with both local bonds and EM FX driving returns, despite the rise in the US dollar. Top performers in the index included the Dominican Republic, as the peso benefitted from a US dollar bond issuance being converted into local currency, plus supportive carry. Local bonds in Thailand also performed well, with investor sentiment improving following the unexpected election victory of the conservative Bhumjaithai Party. Brazilian rates rose in value amid expectations that the central bank will start cutting rates in March, while inflows into the domestic bond market boosted the Brazilian real. A notable outlier was Colombia – the country’s local bonds sold off amid rising inflation expectations and increased bond issuance.

The EM sovereign hard currency debt market (JPMorgan EMBI GD) rose 1.4% in February, led by investment-grade issuers (1.9%) benefitting from the decline in US Treasury yields. High-yield issuers also saw positive returns (0.9%), but the benefit of lower Treasury yields was partially offset by wider spreads. Top index performers included Senegal, as investors grew increasingly confident that financing had been secured for the March Eurobond repayment. Other positive performers included Venezuela, Poland and Chile.